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Derivatives moolah
The nation’s top commercial banks are poised to generate record revenue from trading derivatives this year. And that’s as good a reason as any why no one should expect the nation’s bank to go along peacefully with a plan to regulate the trading of these sophisticated instruments.
In the first half of the year, the 25 biggest commercial banks took in $15 billion from trading derivatives, with JPMorgan Chase and Goldman Sachs being two of the biggest beneficiaries. And as things stand now, the nation’s banks will easily surpass the record $18.8 billion in derivatives trading revenue taken in during 2006.
In short, there’s a lot of money to be made from trading derivatives. So don’t expect banks to easily accept new rules that will put a crimp in this important source of income.
Oh, and just where did Goldman get most of its derivatives trading revenue from? Trading credit default swaps and other credit derivatives. The OCC reports that Goldman, in the second quarter, raked-in $1.48 billion from trading CDS-like transactions.
Derivatives league table
Goldman Sachs is moving up the derivatives charts—with a bullet.
In the latest ranking of US banks with large derivatives exposure, Goldman moves up from fourth place to second, according a report from the Office of the Comptroller of the Currencey. The notional value of Goldman’s derivatives contracts at the end of the first quarter was $39.9 trillion, up from $30.2 trillion in the fourth quarter of 2008.
Goldman leapfrogged over Citigroup and Bank of America. The total value of derivatives contracts is down a bit at Citi and holding steady at BofA compared to the fourth quarter. That’s not too surprisingly, given that those two banks continuing problems with troubled assets on their balance sheets.
Goldman’s derivatives puzzle
Earlier today I posted an item saying that Goldman Sachs is hard as ever to figure out, based on the kind of information (or lack thereof) that it publishes about its operations. I focused on a little-known Goldman real estate management company called Archon Group.
And now comes derivatives guru Janet Tavakoli with a nice followup, noting that Goldman offers few details in regulatory filings about its derviatives business, despite having some big exposure to those often complex investment contracts.
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The Wall
